In its final days, the Bush Administration granted Rhode Island a block grant — essentially a waiver allowing the state increased flexibility from federal Medicaid regulations in return for a cap on federal expenditures. An analysis by Rhode Island’s former secretary of Health and Human Services illustrates how a block grant reduced yearly spending growth by half other states. In the process medical services delivered to the needy improved.
At the time of the waiver Rhode Island’s Medicaid program was hemorrhaging dollars. [I]ts costs were growing by 7.6% annually, and more than a quarter of the state budget went to pay these medical bills. Since the waiver, the state’s official Medicaid documents show that costs rose an average of only 1.3% a year from 2009-2012 — far below the 4.6% rate in the other 49 states.
Two provisions in particular saved money: reduced use of the emergency room for privacy care and home-care subsidies as an alternative to nursing home care.